eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. Australian retail sales the key to interest rates
Updates from local retailers this week indicate fairly conclusively that Aussie consumers are slowing their spending considerably. Big hitters such as JB-HiFi and Harvey Norman both reported a decline in sales during FYQ1, following a fairly successful year for both of the shopping centre giants. Overall, retail sales have held up relatively robustly in 2023 and next week markets expect to see retail sales rise by 0.3% month on month. If retail sales continue to follow the trends observed this year, we may see September’s figures come in above the predicted figure of 0.3%.
After this week's hot inflation reading, another solid print from retail sales would almost certainly solidify the prospect of the RBA hiking rates on Melbourne Cup day. Importantly, this will be the last and key data point the Reserve Bank gets before its November meeting.
2. Apple investors hoping for strong earnings
Overall, this has been a mixed week for tech earnings. Companies are clearly being rewarded for beating expectations but punished for anything less than perfect results.
The release of the new iPhone may come at a great time, and investors will want to understand the level of consumer demand for the new models. AI will also be in focus again (as it is across all major names in tech), but so far, Apple has kept its AI cards close to its chest. With companies now beginning to report success with their AI ventures, investors will want to hear more details from Apple.
Services revenue will also be back in focus, given this is Apple's fastest-growing segment. However, with decade-high interest rates and slowing consumer spending, any weakness in revenue growth wouldn’t be a surprise.
Apple shares (NASDAQ:AAPL) have had a good year and are up 30% YTD but are trading well below their highs of the year after recent weakness. Market consensus is earnings of US$1.39 and revenue of US$89.31 billion.
3. US Fed under the microscope
Staying with the US, Q3 2023 GDP results beat expectations on the back of strong consumer spending this week, indicating that the US economy remains resilient and likely means it can handle further hikes should the Fed decide it’s necessary.
The Fed kept rates on hold in September after hiking interest rates to 5.25%–5.50% at the July 2023 meeting. This week’s Core PCE inflation may show further signs of easing, with another low reading on the cards. This will likely reinforce the case for the Fed to stay on pause next week when it meets to make a call on the Federal funds rate on Thursday. However, rates may stay on hold – which could mean we see US rates stay ‘higher for longer’.
Despite recent good economic news, US shares remained in reverse as tech shares continue to be sold off – even amidst decent – if not mixed – results from the likes of Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), Meta and Alphabet (NASDAQ:GOOGL). Geopolitical tensions also remain a concern, with the prospect of easing tensions seemingly still a while off, putting investors into ‘risk-off’ mode.